By Josh Nathan-Kazis
If you want to know who Wall Street thinks will win the presidential election on Tuesday, take a look at the stock of an obscure health insurer that has become a straightforward bet on the outcome of the race.
Oscar Health, which has a market value of $4.3 billion, is a relatively minor player in the managed-care industry. A quirk of federal policy has made its growth largely dependent on who sits in the White House next year.
On Monday, the stock was climbing as last-minute polls raised Democrats' hopes. Still, the $18.66 share price appears to reflect an expectation that Trump will come out on top.
Oscar's price "tells us the market continues to believe that Trump is likely going to win," says Chris Meekins, a healthcare policy analyst at Raymond James. "But if you look at movement over the last week, the movement does look like it is in Harris's favor."
The logic linking Oscar to the election's outcome is simple. Oscar offers most of its plans through the health insurance marketplaces created by the Affordable Care Act, which the federal government has supported in recent years with generous subsidies that sharply reduce the cost of most plans.
Those subsidies are set to expire next year, meaning higher premiums for millions of people. While the Kamala Harris campaign has said that she would make those subsidies permanent, former President Donald Trump's campaign has implied he might not.
An end to the subsidies could mean a 27% drop in Oscar's membership, according to a note earlier this year from Raymond James analyst John Ransom, who covers the stock.
"Oscar is the cleanest election play, and some traders are trading it as a proxy for the election," Meekins says.
The simplicity of the bet contrasts with other ways to potentially profit from a win by one candidate or the other. The logic of the election-linked bet on Trump Media, that the social-media platform would gain from a Trump presidency, is hazy at best. In healthcare, a bet on Humana on the assumption that a Trump administration would look more kindly on Medicare Advantage is bedeviled by the higher utilization rates Medicare Advantage players like Humana are facing. Other election trades look to Treasuries, Bitcoin, and the Mexican peso.
Oscar's share price, meanwhile, has risen and fallen with the Democrats' perceived odds in recent months.
Ransom tells Barron's that a conservative bear-case outlook for the stock that assumes no subsidy extension would put the price at around $16. If Harris wins and the subsidies are extended, Ransom thinks the stock could climb into the high $30s.
On June 27, the stock closed at $17.65 hours before President Joe Biden's disastrous performance in his debate against Trump. Oscar shares fell 10% the next day to $15.82 in the stock's highest-volume trading day so far this year.
The stock fell into the $14 range in the weeks that followed, a result of the first assassination attempt on Trump and a darkening outlook for Democrats. Shares surged after Biden dropped out, climbing 16% to $17.68 between his announcement and the end of July, as a spate of polls suggested that Harris was gaining momentum.
In August, the stock bounced around the $18 range. But Harris's debate appearance on Sept. 10 set off a run for the stock: Oscar shares jumped 19% on Sept. 11 to $20.67. They kept climbing through mid-September, when they peaked at $23.79.
That enthusiasm petered out toward the end of the month as Harris's lead in national polling averages seemed to wane. The stock fell to the $15 range by late October.
Today, Oscar's share price suggests that investors are still betting on a Trump victory, though not as definitively as they were a week ago. A last-minute surge sent shares up 5.1% on Friday. The stock was trading at $18.66 on Monday, up 5.6% from Friday's close after a poll raised hope that Harris might carry Iowa, a state Trump won in both 2016 and 2020.
Now, the stock has plenty of upside for investors who expect a Harris victory on Tuesday. Election forecasters still see the outcome as a coin toss: The New York Times says that Harris is leading in the national polls by one point, while the polling-focused political news site 538 says that its forecast model gives Trump a 53% chance of winning.
Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 04, 2024 15:48 ET (20:48 GMT)
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